Fascinating day, reports out this morning reminded the market that Trichet uses very explicit “code language” and when he says the words “strong vigilance” it is to mean a 25 basis point rate rise is coming. There did seem to be a green light given from the early going today – actually traders have been doing put structures rather successfully all this week. So the blood is in the water and we shall see if the killing blow gets delivered in April.
There are exceptions to this code talk and we are in extrordnary times in terms of what was true in the past may not be applicable today. I have been advising against buying into an imminent rate rise and until this week that looked like profitable advice. After discussing the nuances of ECB policy with a bright lad from Scotland – I did get valuable insights as to how the ECB doggedly (through that Tuetonic Twit Merkel and others) may have to dance to Germanic tunes even though the peripherals are on the verge of collapse and as the papers today point out if Spain goes the entire EU could collapse. Say that four times and think about it hard.
Also on the dramatic side the daily MACD has crossed – meaning for momentum traders opportunities now abide on the sell side of the market. Any long positions – unless you are a long – long term trader and have something on that you are protecting with weekly or monthly trend analysis – should be liquidated.
Larger flows are listed below - note JP Morg. big covered put buyer in May 10yr. options. This buying has allowed the big strangle seller to get good prices on shorting premium in June. Also New Edge was quick to sell inflated may straddles shortly after the 1st round of buying by JP in the May puts.
| 3/25/11 | |||||
| Paper | S | 10,000 | EOU 9850/9887 c spread | 20 | 9855 area |
| Paper | B | 11,000 | EDH82/87 p spread | 7 | 9917 area |
| Paper | B | 5,000 | EDU12 77/85 p spread | 20.5 | 9953.5/54 |
| New Edge | B | 10,000 | EOM 9825/9850/9875 p fly | 3 | 9886.5/87 |
| Paper | B | 5,000 | EDM12 9750/9850 p 1X2 | 6.5 | 9886.6/87 |
| BCG | B | 3,000 | EOM 9750/9862 p 1X2 | 6.5 | 9886.5/87 |
| Paper | S | 2,000 | EDH9925 c | 21 | 9918/18.5 |
| Paper | B | 5,000 | EOU 9825/9850/9875/9900 pc | 6 | 9954/54.5 |
| Paper | B | 1,000 | EOU 9900/9925/9937 c fly | 5 | 9853/53.5 |
| Fed Fund opts. | |||||
| Paper | B | 1,500 | FFV9950/9975 p spead | 2.5 | 9977.5/78 |
| Smith B | B | 1,000 | FFJ 9987c | 0.5 | 9986/86.5 |
| 10yr. Opts | |||||
| JP Morg | B | 15,000 | TYK117 p | 11 | ^11919.5 14% |
| JP Morg | B | 10,000 | TYK117 p | 12 | 11918.5 |
| Paper | S | 2,000 | TYK119.5 strad | 1.56 | 11917 area |
| Smith | S | 10,000 | TYM117/122 strangle | 0.58 | 11919 area |
| Paper | S | 1,000 | TYK 119.5 strad | 1.55 | 11915/16 |
| JP Morg | B | 25,000 | TYK 117 p | 11 | ^11920 |
| Futs were 11922 outright so maybe scalping some to net a better price on option?? | |||||
| Paper | S | 5,000 | TYK117/118 p1X2 | even 117's over | 11918 area |
| Paper | B | 700 | USM121p | see below | N/A |
| Paper | S | 700 | TYM 119.5p | .50 US over | N/A |
| Above 2 executed as a NOB working more | |||||
| Paper | B | 3,000 | USK 117/118/119 p fly | 0.09 | 11918/18.5 |
| RJO | B | 1,000 | TYM119.5 strad | 2.44 | ^11921 |
| Paper | S | 2,000 | TYJ118.5/119.5 p 1X2 | 0.04 | 11919/20 |
| Paper | B | 2,500 | TYJ119.5 p | 0.04 | 11920/21 |
| New Edge | B | 1,000 | TYK123.5c vs 115/116/117 p ladder | .01 call over | 11918.5/19 |
| Paper | S | 3,000 | TYJ119.5/120.5 p 1X2 | 0.44 | 11915/16 |
| CSFB | B | 2,000 | TYM115.5/117 p spread | 0.16 | 11915/16 |
| Swiss B | S | 5,000 | TYJ119.5 c | 0.08 | ^11917 |
I think the ECB will raise the rate once, however it is diffcult to argue that a series of rate hikes will follow given the current market environment.
Posted by: Value | 03/27/2011 at 09:35 PM